If you are married, one of the most important things to discuss with your spouse is how the two of you will handle your estate. It can be a difficult conversation, but sitting down with an estate planning lawyer and working out a solid plan will give you peace of mind and the knowledge that your spouse will be secure in the event of your death. One important tool to consider is the AB trust: In essence, an AB trust lets you pass on the benefits of your assets to your spouse while avoiding excessive taxation.

AB Trust Definition

An AB trust is created by a married couple to manage their estate, and is irrevocable. Each spouse places property into the trust. However, instead of naming his or her spouse as the beneficiary, Spouse A chooses a third person. In the event of the first spouse’s death, Spouse B will not outright own the property that was placed in the trust. He or she will have limited, specified powers according to the terms of the AB trust. The surviving spouse can collect interest on money paid into the trust, use property, and spend funds on education, health care, and maintaining his or her standard of living. He or she can spend some of the principal in certain instances.

It’s important to note that Spouse B does not actually own the assets, and may not change whichever beneficiary the first spouse designated when creating the AB trust. This means that when the second spouse dies, the property passes on to that designated beneficiary. Both spouses participate in the trust (this is why it’s called an AB) trust, which means that the estate is passed down in two parts to the eventual heirs.

The Advantages of an AB Trust

You’ll ensure that your children (or another heir) receive their inheritance after your spouse’s death. A common conundrum, especially in second marriages, is finding a way to guarantee that your children inherit your property while still providing for your spouse during his or her lifetime. An AB trust can accomplish this objective.

The surviving spouse does not need to pay estate tax on the property in the AB trust. More of your property will be passed onto your heirs.

Although the surviving spouse does not own the property in the AB trust, he or she can use the property to generate income, and will have total access to that income. In this way, an AB trust allows you to protect your estate while also those you care about make use of the estate.

How an Estate Lawyer Can Help

If you are considering setting up an AB trust, it’s important to discuss the benefits and drawbacks with an attorney. Every couple’s estate planning needs are different, and must be crafted on an individual basis. For many couples, an AB trust is an attractive option. To discuss your estate plan further, contact us at the Law Offices of Omar Gastelum & Associates, PLC. We can help you formulate an estate plan that reflects what you envision for your family.

About the Author

Omar Gastelum is an accomplished attorney with a strong background and broad experience in Family Law, Immigration, Real Property, and Civil Litigation. He has been helping businesses and individuals with their legal needs for over 13 years.

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